In recent years, the financial landscape has witnessed a significant transformation thanks to the emergence of new financing models known as 'neofinancing'. This concept represents an interesting fusion of traditional alternative finance and a complementary approach to conventional financing sources.
The term 'neofinancing', in fact, refers to a set of innovative financial practices that offer companies broader and more diversified access to capital. These practices range from alternative finance, such as private equity and crowdfunding, to complementary solutions such as direct lending and minibonds. The aim is to provide companies with a wide range of financial options that are best suited to their specific needs.
SMEs and access to credit
The year 2023 was characterised by a gradual rise in interest rates, dictated by the European Central Bank to keep inflation under control. The consequences for SMEs were very heavy, especially since the rise in rates restricted investment capacity and certainly reduced liquidity.
Also limiting SMEs' access to traditional credit is their medium-low creditworthiness, a consequence of the introduction of the Basel III principles in force since the end of 2013. The situation is not likely to improve, also considering the sharp decline in the number of bank branches in the territory: in the future, the perimeter of banking activities will in all likelihood be increasingly reserved for ordinary activities.
Looking ahead, however, 2024 could be the year when we will see a cut in the cost of credit by central banks. Although it is too early for the ECB leadership to talk about net intervention, a reversal of the trend in the coming months cannot be ruled out.
The Role of Alternative Finance
Alternative finance has played a key role in the development of neofinancing. Through tools such as equity crowdfunding and crowd lending, companies have access to private equity-based financing that allows them to grow and expand without having to resort to traditional banking channels. Among the many advantages of this type of financing are the ability to access capital from a large network of investors, the ability to involve fans in the success of the business, and the potential exposure to additional financial resources and expertise.
Complementary Solutions
In addition to alternative finance, neofinancing also includes complementary solutions that further expand the financial options available to businesses. Direct lending, for instance, allows companies to obtain direct financing from non-banking financial institutions, offering flexibility and faster funding times compared to traditional banks. Minibonds, on the other hand, allow companies to issue bonds directly to investors, providing them with an additional source of long-term capital. In particular, this latter source of financing has the advantage of offering long-term investment without diluting equity capital, with the flexibility to structure its own financial terms.
Neofinancing in Italy: Data and Trends
In Italy, neofinancing is gaining increasing popularity among companies looking for alternatives to traditional financing. According to recent data from the Crowdfunding Observatory of the Politecnico di Milano, the success rate of Equity Crowdfunding campaigns in Italy is around 90 per cent, indicating a growing interest on the part of investors for this type of direct financing for businesses.
Minibonds are also becoming increasingly popular as a financing instrument for companies. According to recent data, EUR 1.095 billion was raised in 2023 from 184 issues, 39 per cent of which were below EUR 2 million. Evidence shows that the Italian minibond industry contracted in 2023 compared to the previous year due to rising interest rates and a weak economy. Although the decrease was more pronounced in the first half of the year, a recovery was seen in the second half, pointing to a possible recovery of volumes in 2024.
The Future of Neofinancing
In conclusion, neofinancing represents an important step in the evolution of corporate finance, offering companies greater flexibility and access to capital. Despite some downturns due to the volatility of the global economy and rising interest rates, the sector continues to grow and develop. It is important to closely monitor emerging trends and the opportunities that neofinancing can offer. With a wide range of options available, companies are more likely to find financial solutions that fit their specific needs, thus promoting economic growth and innovation.
Fostering business growth by offering professional access to the capital market is precisely the goal of 2meet2biz.com. With the upcoming merger of our equity crowdfunding and minibond platforms, we aim to reduce the distance between SMEs and investors by providing a wide range of alternative finance instruments customised to the needs of each company, including financing, investments, acquisitions and strategic transactions.